Private Equity Firms Show Interest in Intel Security Business

A number of private equity firms reportedly are researching Intel’s security unit in case the chip maker decides to put it on the market.
Private equity firms reportedly are looking into Intel’s security business amid rumors that the chip maker is considering selling off the unit.According to a report by Bloomberg, such firms as Thoma Bravo, Permira and Vista Equity Partners are among those doing research in case Intel decides to sell the security business, which is primarily based on the company’s $7.7 billion acquisition of antivirus vendor McAfee.The interest comes about two weeks after reports began surfacing indicating that Intel officials had been meeting with bankers to discuss the future of its cyber-security unit, although unnamed sources in Bloomberg’s report said that no decision had been made about the business and that in the end, Intel may decide to keep the group.It also comes as Intel continues plans for its Focus Security Conference in Las Vegas in November, and as Intel Security officials announce the expansion of its Security Innovation Alliance by adding 24 new technology partners and adding to its portfolio of security offerings.

Spokespeople for Intel and the private equity firms have not commented on the reports.

When Intel bought McAfee, company officials talked about integrating McAfee security technologies into Intel processors for a broad array of systems, from PCs to connected devices. Putting security technology directly into the chips would better protect the systems from the growing range of cyber-threats, they said.However, Intel is undergoing a transition that includes shifting its focus away from PCs and to such areas as the cloud, connected devices and 5G connectivity.

The global PC market has seen sharp shipment declines since late 2011, and PC and component makers like Intel has been looking to reduce its dependence on the PC space, which currently still accounts for about 60 percent of Intel revenues.Intel also has scaled back its ambitions in a mobile device space dominated by ARM and such partners as Qualcomm and Samsung, and instead is moving aggressively into other areas.When reports about Intel considering the sale of the security unit—which the company in 2014 renamed Intel Security—first arose in late June, Roger Kay, principal analyst with Endpoint Technologies Associates, noted that the nature of cyber-security and the response to threats had changed since Intel bought McAfee.In particular, security software vendors are addressing such sophisticated attacks like phishing and spear phishing with technologies that go beyond antivirus, which calls for a “different set of skill sets than McAfee originally brought with it.”Kay said the security business could be a drag on Intel financials, although in the first quarter, the unit generated revenue of $537 million, a 12 percent gain from the same period in 2015. However, even if the company sheds the McAfee unit, Intel will “need a security story of some sort, and that wasn’t it,” Kay told eWEEK. “But they’ll need a security story.”A sale of the security unit would add to the upheaval at the company caused by the restructuring under CEO Brian Krzanich.

That has included the hiring in November 2015 of longtime Qualcomm executive Venkata “Murthy” Renduchintala as president of the newly formed Client and Internet of Things Businesses and Systems Architecture Group, which has led to a number of longtime executives leaving Intel.In addition, Intel has announced it will cut 12,000 jobs—which is about 11 percent of the worldwide workforce—by the middle of next year.

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